State Street ( STT) on Tuesday reported a first-quarter profit that beat Wall Street's expectations on an operating basis, but offered a tepid forecast for the rest of the year. The Boston-based money management company said earnings per common share on an operating basis was $1.04, down from $1.39 in the year-ago period. Operating earnings exclude M&A costs associated with the 2007 acquisition of Investors Financial Services Corp., partly offset by net interest revenue of $7 million related to State Street's participation in the Federal Reserve's Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. State Street reported a 22.3% year-over-year drop in revenue to $2 billion. Analysts had expected State Street to earn $1.02 a share on $2.29 billion in revenue. Chairman and CEO Ronald Logue called the quarter "one of the toughest operating environments in decades," and said "continued unsettled economic environment and more weakness in the first quarter than we expected" would likely lead 2009 results to the "weaker end" of previous guidance. The company in February said it expected operating revenue to decline between 8% and 12%; operating earnings per share to decline between 12% and 16%; and operating return on equity to be between 14% and 17%. State Street set aside a provision for loan losses of $84 million during the first quarter, to provide for expected losses related to the commercial mortgage loans acquired in the fourth quarter. The company reported tangible common equity of 5.87% at the end of March. On a pro forma basis as a percentage of total assets, assuming consolidation of the asset-backed commercial paper conduits, the TCE ratio improved to 2.22% from 1.19% at the end of December.